Global M&A Trends Survey Report (2023-2024)

Capstone Partners & IMAP Survey Finds Middle Market M&A Outperforms Broader Market Despite Global Deal Flow Decline

Capstone Partners and IMAP have released their 2023-2024 Trends in Global M&A Survey Report, with insights from M&A advisors across the world. This report combines Capstone’s in-depth investment banking knowledge with proprietary data obtained from 100 participating IMAP M&A advisors across 65 countries. Capstone and IMAP surveyed M&A advisors between September 26, 2023, and October 24, 2023. The full report, available for download below, provides insight into M&A market activity throughout 2023 and forecasts for deal making conditions in 2024, with sections including:

1. M&A Market Conditions
2. M&A Valuation Dynamics
3. Sell-Side M&A Considerations
4. Global Economic Impacts

The report also reveals data by industry and region, highlighting significant variances.

Key Findings:

Strong M&A Volume Forecasts for 2024

As M&A activity likely neared or reached its trough in 2023, the majority (51%) of total advisors surveyed anticipate 2024 deal flow to increase. However, the lion’s share (47%) of those respondents expect a moderate increase in 2024, indicating that a full M&A volume rebound may not materialize over the next 12 months. Among total advisors surveyed, zero expect a significant M&A volume decline in 2024, further supporting the thesis that deal flow has neared or reached its trough. Advisors’ forecasts for 2024 transaction activity have heavily depended on their operating region. Of note, 12.5% of advisors in Latin America anticipate a significant year-over-year (YOY) deal flow increase, followed by advisors based in North America (7.4%) and Asia (7.1%). Europe, the Middle East, and Africa (EMEA)-based advisors have remained the most skeptical regarding M&A market health, with 20.8% forecasting a moderate decline.

Despite a decline in overall M&A volume, middle market deal activity continued to outperform the broader market in 2023, as identified by 57% of total investment bankers surveyed. Additionally, only 5% of total advisors indicated that the middle market underperformed the broader market, illustrating a resilient acquirer appetite for privately held and sponsor-backed businesses. Middle market M&A has also demonstrated significant strength at the industry level, with the majority of advisors in eight out of the 12 industries surveyed reporting that the middle market outperformed broader M&A activity in 2023. This trend has been the most prevalent in the Aerospace, Defense, Government, & Security (ADGS) industry, in which 75% of advisors noted that the middle market outperformed total activity.

M&A Purchase Multiples Compressed in 2023, Further Moderation Anticipated

Elevated inflation and interest rates placed downward pressure on M&A purchase multiples in 2023, with 66% of total advisors surveyed reporting a decline in M&A multiples compared to 2022. However, recession-resilient industries including Technology, Media & Telecom (TMT), Healthcare, and FinTech & Services continued to draw healthy multiples. More than two-thirds of advisors indicated that participants in the TMT industry received the highest M&A valuations in 2023, mirroring 2022 pricing trends.

M&A purchase multiples are expected to remain compressed in 2024, with 67% of advisors surveyed anticipating little to no change in valuations compared to 2023, likely driven by market/economic uncertainty and a lack of motivated acquirers. Advisors showcased significant consistency regarding 2024 industry valuation forecasts, with the TMT, Healthcare, and FinTech & Services industries most likely to receive the highest M&A valuations, matching industry valuation rankings from 2023.

Acquirers Prioritize Strong Financial Profiles

Buyers have become increasingly selective in their acquisition pursuits, prioritizing target companies with strong financial profiles. This has largely been driven by a difficult transaction financing environment with many acquirers hesitant to employ significant leverage at elevated rates. Financial criteria comprised the top three most important M&A target characteristics for acquirers in 2023, as noted by total advisers surveyed. This includes strong margin profiles (71% of advisors), recurring revenue (63%), and defensible cashflow (47%). However, select operational criteria has remained relevant to acquirers in 2023 such as customer stickiness (45% of advisors) and differentiated product offerings (32%).

Key to Successful Sell-Side Deals: Realistic Valuations

To achieve a successful M&A deal for a seller, nearly all (95%) advisors pointed to setting a realistic deal valuation as very or somewhat important, closely followed by communication with the owner and C-Suite (93%), building a good buyer’s list (92%), and financial due diligence (88%). These success elements closely align with the deal closing hinderances advisors faced throughout 2023, with the majority (58%) of investment bankers identifying sellers’ excessive transaction valuation expectations as a primary hurdle. Strong communication with the selling entity’s owner and C-Suite can also rectify a misalignment on valuation expectations.

EMEA & North America Most Likely to Face Recession

Among all advisors surveyed, 60% forecasted that a recession in their operating country would be very or somewhat likely over the next year, down 18.2% YOY. At the regional level, the EMEA and North America markets are most likely to face a recession in 2024, as noted by 69.8% and 63% of advisors, respectively. Asia-based advisors have continued to be the most optimistic regarding the likelihood of a recession, as 64.4% of advisors in this region predict an oncoming recession to be very or somewhat unlikely and only 28.5% expect a recession to be likely.

Download the Full 2023-2024 Global M&A Trends Survey Report

Our full report publication includes an in-depth analysis broken down by industry and region and is available in PDF format.

To request the report, please complete the form below and a copy will be immediately emailed to you.

Video Insights: 2024 M&A Trend Projections with Managing Director Ken Wasik

For a deeper dive on global M&A trends, and the regional M&A trends shaping activity in North America, hear directly from Managing Director and Head of Consumer Industry Investment Banking Ken Wasik in our latest video update with IMAP.